During the journey to Lonely Mountain, Bilbo Baggins was captured by the Goblins of Goblin-town together with the Dwarves of Thorin and Company. They were brought before the Great Goblin, who accused them of spying, and was enraged when he found out that Thorin was carrying Orcrist, a sword the Great Goblin remembered from Gondolin. With the help of Gandalf, the Great Goblin was slain and Bilbo and the Dwarves escape, pursued by force of Goblins.

Goblin-town was a series of tunnels and caverns, which went all the way through the mountains, with a "back door" near the Eagles' eyrie in Wilderland. The cave of Gollum was close to this door.